Co-op changes 'risk turning it into a management-led oligarchy'

The Co-operative Group headquarters in Manchester. Last month the Co-op’s members voted in favour of principles for governance reform. Photograph: Christopher Thomond for the Guardian Christopher Thomond/Guardian

In a speech at the weekend, Nick Eyre said the Co-op needed to overhaul its governance after previous management was left unchecked to make decisions that led to the £2.5bn loss last year.

Eyre said the group risked making the same mistakes again if it pushed through a proposal to hand selection of directors to a board sub-committee made up of management and their appointees.

"If management and an existing board take on this power to hire and fire this ceases to be a co-operative and instead becomes little more than a self perpetuating, management-led, oligarchy," said Eyre. "This is certainly not the answer and if it comes to pass then all who cherish the co-operative and mutual model in a diverse economy might as well pack up and go home."

Last month the Co-op's members voted in favour of principles for governance reform after the board made concessions to activists who had been angered by criticism from Lord Myners, the City veteran who drew up the plans. The membership will vote on more detailed proposals at a special meeting in September.

Speaking at an event held by the National Federation of Progressive Cooperators, Eyre said giving members a vote on directors would allow them to hold the board to account.

Eyre left the Co-op in 2007 because he said he did not want to work with Peter Marks, who became chief executive that year. Eyre criticised Marks' decisions, including the purchases of Somerfield and Britannia building society, which he thought were behind the group's plight. Marks said on Friday he did not want to comment on his speech as that was his "stance at the moment". He has not commented on the Co-op since appearing at the Treasury committee in October.

A Co-op spokeswoman said: "The group is working on proposals that will be published and voted on by members later this year."